Incentive Pay

In: Business and Management

Submitted By rriyanka
Words 1587
Pages 7
In today’s world most employers are faced with one big question – How to keep their Employees motivated in order to increase their performance efficiency. In the past few decades, a growing proportion of firms have started using Results Control as a way of keeping employees motivated rewarding employees for their efforts and outcomes and including this aspect in the pay schemes.
(Bryson, Freeman, Lucifora, Pellizzari and VirginiePérotin [2011]). This has been supported by research that indicates pay incentives lead to greater effort than it would have if it was not present
(Bonner, Sprinkle [2002]). Results Control empowers employees to take the best possible actions and holds them accountable for these actions in order to obtain the desired results (MCS). The fact that even today many employers continue to use pay incentive systems is an indicator that the model has worked and there are many advantages to using it, however some evidence indicates that there are few factors that determine its effectiveness (Bonner, Sprinkle [2002]). This essay will focus on the relationship between pay incentives and employee effort using economic theories, advantages and instances where it has been successful and the factors that impact the effectiveness of these incentives. The essay will contend that pay incentives are powerful motivators to induce effort however it needs to be designed carefully considering various contingency factors.
There is a strong relationship between pay incentives and employee efforts, consequently greater efforts lead to higher performance. Evidence suggests that there are certain theories that detail the process through which monetary incentives lead to increase in efforts. According to (Bonner,
Sprinkle [2002]) the Expectancy Theory an individual’s motivation is based on the relationship to the attractiveness of the outcome and the…...

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